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The health hazards of recessions for older workers

We all know that recessions cause a great deal of suffering, particularly for those who lose their jobs. The recent recession, in particular, has pushed up the unemployment rate from 5% in December 2007 to a peak value of 10% in October 2009. Unemployment continues to remain high, at 8.1% in August 2012.

Workers aged 55 and older generally have a lower unemployment rate than younger workers. However, older workers who lose their jobs during a recession may incur a substantial cost in terms of their long-term health and survival, according to a new study by economists Courtney Coile, Phillip Levine, and Robin McKnight of Wellesley College.

Specifically, these economists show that workers who experience a recession when they are in their late 50s are less likely to survive to age 79. While it’s not entirely clear why this occurs, the authors suggest one plausible story: Older workers who lose their jobs are more likely to remain unemployed for a long time. Because of the link between health insurance and employment, unemployed older workers may lose health coverage until they become eligible for Medicare at age 65. Their loss of income may also make them unable to afford their medical bills. In support of this explanation, the authors present evidence suggesting that workers who face a recession when they are in their late 50s are less likely to have pre-Medicare health coverage and more likely to skip doctor visits because of financial considerations.

How large are these effects? Consider a group of 1 million 58-year-old workers. The authors estimate that when the unemployment rate goes up by 1 percentage point – say from 6% to 7% – it reduces these older workers’ chances of surviving to age 79 by roughly 0.045 percentage points. That is, on average, an additional 450 of the 1 million older workers will die before age 79. They also estimate that this one-percentage-point rise in unemployment increases the chances of an older worker suffering long-term unemployment by about a half a percentage point. That is, we’d expect an additional 5,000 of the 1 million older workers to experience long-term unemployment. If the 450 additional deaths occur exclusively among the 5,000 workers who experience long-term unemployment, it means that an additional 9% of that group does not survive to age 79 as a result.

If the authors’ results are correct, the recent recession and persistently high unemployment will take a deadly toll on older Americans.